The stock market has continued to rally over the past year, with the S&P 500 posting fresh all-time highs. This rally in stocks has made it challenging for many investors to find undervalued blue-chip stocks.
Buying stocks at higher valuations can be devastating for equity investors. That’s because any underperformance relative to market expectations can lead to a sudden decline in the share price of a given stock. Companies trading at premium valuations can provide a limited margin of safety in that way.
With that said, there are still some quality undervalued blue-chip stocks that I believe should be part of investors’ portfolios. Although the valuations of these stocks have continued to increase, prudent investors will be able to recognize that they are still opportunities in the market. Plus, having blue-chip stocks in a portfolio is important because these companies provide safety as steady businesses with consistent returns.
So, what follows are my three picks for undervalued blue-chip stocks to buy in March 2024. I have screened these stocks by looking at the quality of each business, their respective competitive moats and current valuation multiples.
Without further ado, let’s discuss the three most undervalued blue-chip stocks to buy in March 2024.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) has performed well over the past one year and the price of AMZN stock has reflected its positive results. Indeed, Amazon’s recent fourth-quarter results exceeded expectations, driven by a robust 9% increase in online sales and remarkable 27% growth in advertising revenue. The company also continued to gain market share in the quarter, driven by its efforts to increase delivery speed and sales during Black Friday and Cyber Monday. With the e-commerce market still expanding, Amazon can continue to gain market share in the future with its focus on high-growth spaces like fashion, home, beauty and pets.
Shares of Amazon are up more than 85% over the past one year. However, the stock is still trading well below its historic valuation multiple. AMZN stock is currently trading at a forward price-to-earnings (P/E) ratio of 41 times, significantly below its five-year average forward P/E ratio of about 185x. Accordingly, I believe Amazon presents an attractive opportunity for long-term investors to buy shares at a cheap multiple. That makes it one of the top undervalued blue-chip stocks to buy in March 2024.
Apple (AAPL)
Although Apple (NASDAQ:AAPL) has climbed more than 270% over the past five years, AAPL stock is still trading at a moderate forward P/E ratio of 26x, which is in-line with the company’s five-year historical average multiple. The company has also done well over the past decade with its strong suite of products and ensuing demand that continues to fuel revenue growth.
Although Apple has continued to innovate and launched new products like the Apple Vision Pro, the company’s core iPhone products and high-margin Services segment continue to be steady cash-flow drivers. Apple’s large amount of cash on hand has also meant that the tech giant continues to buy back AAPL stock.
Of course, shares have faced some negative sentiment, as iPhone sales have been weaker in China, with Huawei’s success posing a risk to Apple’s market share. However, Apple is strategically focused on expanding into other emerging markets like India, where a growing middle class and rising income levels provide the company with a good long-term opportunity. That helps solidify AAPL as another contender among undervalued blue-chip stocks.
Alphabet (GOOG)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock is up more than 50% for the past one year. However, shares still trade at a relatively cheap forward P/E ratio of around 20x, below the five-year historical average forward P/E of nearly 26x.
Recently, the company posted strong Q4 results with revenue of $86.3 billion, beating market expectations by around $1 billion. The robust results were driven by a favorable trend in the core advertising business and increased growth in non-advertising activities, such as enterprise cloud services and subscriptions.
Alphabet boasts over 2 billion users across its applications, including Chrome, Gmail, YouTube, Google Search and the Google Play Store. The rise of generative artificial intelligence (AI) continues to be a catalyst for the company as well, with Alphabet recently launching its latest multimodal language model, Gemini.
Currently, Google is experimenting with Gemini in search to enhance answers, particularly for complex queries. Google’s AI-driven solutions are also empowering small- and medium-sized businesses to compete effectively with larger brands in advertising, helping streamline workflows.
On the date of publication, Mohammed Saqib did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
